NACD Southern California hosted a breakfast program at The California Club on Monday, May 18, from 7:00 am to 9:15 am including time for networking and peer-to-peer exchange. There were 35 members and guests in attendance at this unique event.

The theme of the meeting was an interactive workshop discussion of a provocative film centered around critical board and ethical issues titled “A Price Worth Paying?".

This 90-minute program was led by David Kistenbroker of Dechert LLP and Professor Ken Merchant of USC Marshall School of Business.

Mr. Kistenbroker's firm created the video case study based on real life examples. Professor Merchant currently teaches the Ethics class (among others) in the Accounting department of the Marshall School.

The film was shown in three parts, with vibrant discussion between the speakers and audience occurring after each segment.

The key discussion issues included:

New CEO compensation and incentive packages;

Aggressive moves by the new CEO in hiring and an acquisition;

The stacking of board votes by the non-executive Chairman;

Failure to perform due diligence, brushing over key signals that would indicate further review;

Muffling dissenting voices within the company, dismissing the message of a whistleblower as a disgruntled employee; and

Not providing enough support to the General Counsel and Internal Audit function to perform their task.

NACD Southern California hosted a lunch program at The California Club on Thursday, April 16. There were 40 members and guests in attendance at this informative event to participate in the discussion focused on Cyber Security.

Dr. Richard Schroth and Mr. Chris Mitchell were the two speakers. Dr. Schroth is a Board Fellow and faculty member of NACD, and currently consults with Boards (not management) on cyber issues. Mr. Mitchell is a board member and advisor to nine companies and the Chairman of NACD Southern California Chapter.

The 90 minute discussion was punctuated with a lot of questions from the audience.

The framework for the conversation was the Five Principles outlined in the NACD Handbook on Cyber-Risk Oversight. The messages for each of the principles were conveyed through relevant real-live examples and intensive Q&A.

Take-aways were as follows:

Cyber is now the fifth theater of war - besides land, sea, air, and space - and there is an offensive component that may be emerging in some companies.

Make sure that policies are in place regarding cyber escalation and use of resources that fall outside the norms of containment and mitigation

Private Equity firms have a great interest in cyber cleanliness before having companies in their portfolios. Valuation Protection is more important than mere compliance.

Companies need to protect digital assets not just inside the firewall but also outside the firewall to include social media - and CIO/CISO should acknowledge their expanded roles.

The five NACD principles for board members are as follows:

1. Cybersecurity is an enterprise-wide risk management issue, not just an IT issue. 2. Understand legal implications of cyber risks specific to the company 3. Have adequate access to cyber expertise and provide enough time on board agenda 4. Management must establish framework with adequate staffing & budget 5. Identify cyber risks to avoid, accept, mitigate, or transfer

3/18/15 - "Disrupted or Disruptor - Which one is your Company?"

NACD Southern California hosted a lunch program at The Pacific Club on Wednesday, March 18. There were 42 members and guests in attendance at this sold out event to participate in the panel discussion focused on the topic of “Disrupted or Disruptor – Which one is your Company?”.

The Audit Committee Roundtable of Orange County (ACROOC) was a joint host of this program.

The panel consisted of three outstanding experts: Bob Zukis (Senior Director at Genband, a 30 year retired PwC veteran and NACD So Cal board member), Martin Giles (formerly the US Technology correspondent for The Economist and recently appointed partner at Wing, a VC firm in the Valley), and Sean Middleton (founder and COO of Cognizant’s Emerging Business Accelerator).

Bob Zukis moderated the panel and engaged the audience throughout the 90 minute session.

Key Takeaways:

Stage setting by the three panelists using Gartner’s Hype Curve indicating where the various technologies are on the spectrum. For Board members, there were a couple of mnemonics to focus on the most disruptive technologies -- “DMC” [Data, Mobile, Cloud] or “SMAC” [Social, Mobile, Analytics, Cloud].

Barriers are getting very low for disruptors, although scaling still remains a formidable task. e.g. Uber and Airbnb.

Big difference between “privacy” and “security”. Customers want an opportunity to take back their own data. Establish relationship with customers so the Company knows where they are and can send them tailored messages.

Board members can oversee the various technologies proposed by management and to recommend those that management has not suggested:

Make a series of small bets to reduce the cost of failure

Watch for “pirates” within the Company who are not being listened to. They are the disruptors and they will jump ship quickly if not listened to.

About 15% of technology spending is for new technologies, the rest is to “keep the lights on”. It takes several years (3 to 5) for technology investments to start paying off.

Specific ideas for Board members to ensure their Company is on top of technologies that affect them:

Be very supportive of “intrapreneurs” by having Board members talk to the disruptors

Couple of Board members need to be disruptors themselves

Periodically have Board meetings in Silicon Valley and arrange to have meetings with young companies that could be disruptors

The single biggest disruptive factor mentioned by each of the three panelists were:

Sensors in both hardware and software, because sensors both gather and transmit data

Analytics - making sense of the massive amounts of data, with not enough scientists to cope with the analysis

NACD Southern California hosted a breakfast program at The California Club on Tuesday, February 24. There were 35 members and guests in attendance to participate in the panel discussion focused on the topic of “Revenue Recognition Changes: Impacts Beyond Financial Statements - What Directors Need to Know”.

The panel comprised of moderator, Joan Herman (board member of Convergys and HealthSouth), Bala Iyer (board member of several companies including QLogic and Power Integrations), and Dorian Redding (Partner with EY Advisory Services).

The panel discussed the implications of the new mandated process of revenue recognition by public companies, to be effective in 2017.

Takeaways:

Revenue to be recognized when customer has control of the asset. Change is industry-specific and will affect most sectors including pharma, software, retail, real estate, and others.

Change reflects move towards more principles-based than rules-based and brings US GAAP closer to IFRS. During the transition period, be prepared for intra and inter-company pressures as each group has its own ideas on “principles”.

Every contract needs to be examined for performance obligations, transaction price and ability to recognize revenue when each performance obligation is satisfied. [Excludes leasing, insurance, and financial instruments contracts].

Audit Committee needs to understand from the company:

Effects on processes and financial reporting - request a pro forma under new revenue recognition rules

Financial staff preparation for the change and whether it has sufficient resources. Companies that have started to work on the change find that examination & revenue impact by each contract is both painful and time-consuming

How external auditors are involved in the implementation

Compensation Committee to understand the impact on executive bonus compensation, in particular, and the commissions plans in general.

Board should request company’s plans for:

Changes in contract terms and conditions going forward immediately, to reflect new policies and properly record revenue

Communicating with stakeholders (especially the investment community) to prepare them for change

1/7/15 - "India - Dealing with the New Regime"NACD So Cal held its first event of 2015 on January 7, a luncheon program focused on the topic of “India - Dealing with the New Regime”.

The foundation for the program was the election of the new Prime Minister Modi in May 2014, and the very high degree of interest shown by both the US Administration and the US business community expecting that the business climate will change for the better and be more friendly.

The objective of the panel discussion was to draw out the causal factors for board members to consider if their companies were in the process of either entering an Asian market, expanding their presence, or items to consider if their Company was already doing business in India. The panel attempted to answer the overall question - “Why India, Why Now?”

The following three panelists were chosen to provide three different perspectives for board members.

Jon Layne (partner at Gibson Dunn)

Gordy Kanofsky (trustee of the Neilsen Foundation and former CEO of Ameristar)

Keep an eye on developments related to forum selection bylaws and determine what your company should do.

Watch ongoing developments related to fee-shifting provisions, whether that should be in the bylaws or the charter. Delaware legislature will debate the bill in the CY 2015 session. Consider what, if any, actions you should take.

A board must make a conscious decision to accept or reject any offer, with or without establishment of a Special Committee. You cannot simply say “no” without due consideration.

Based on prior court decisions, good governance, and legal protections, it is best practice for the board/special committee to hire competent, independent, financial advisors.

Directors appointed to a Special Committee must be both independent and disinterested.

Courts will defer to a board’s business judgment but will carefully scrutinize process to confirm that processes related to transactions were appropriate.

This program will include a twenty minute presentation by economist Dr. Sung Won Sohn regarding global economic markets and implications for boards, citizens, and investors. The presentation will be followed by a panel of corporate directors considering the significance of related economic and political policies and trends identified in the presentation.

Plan to join the USC Marshall School
of Business and NACD Southern
California Chapter for the annual
Corporate Governance Symposium.
Don't miss this opportunity to meet
with experts and board colleagues
from throughout the West as we
examine today's turbulent times and
the impact of steady board leadership
in navigating these challenges.

World-renowned business educator and coach, Dr. Marshall Goldsmith is the leading expert in his field. His singular ability to get results for top leaders has drawn over 150 CEOs and their management teams to address change in the workplace. They want what Dr. Goldsmith offers: practical and proven methods.

A new administration brings with it changes in priorities for the array of parties that scrutinize public and large companies: the plaintiff's bar, the SEC and the DOJ, to name a few. Join us as we dive into these topics and more.

This program includes a twenty minute presentation on the state of the global economic markets and the implications of the recent U.S. presidential election. The presentation will be followed by a corporate governance panel of seasoned corporate directors discussing board deliberations during times of economic uncertainty and the impacts of the policy and program changes implemented by the Trump Administration.

Please join us for a fireside chat with Chelsea Grayson, as we get an inside look at the challenges American Apparel has faced in the midst of bankruptcy. This informative conversation will be facilitated by Dr. Larry Taylor, Chairman of The Creighton Group.

Don't miss this fireside chat with Edison International Chairman and CEO, Ted Craver. Ted will share his experience leading the evolution of company strategy, aligning with California and national policy leaders on climate change action, Board transition, and accountability to shareholders for strategy and financial performance.

This program includes a twenty-minute presentation on the current state of the global economic markets followed by a corporate governance panel of seasoned corporate directors discussing board deliberations during times of economic uncertainty. Among the panel topics addressed are the impacts of proposed changes to interest rates, corporate tax rates, and other regulations.

A fireside chat with Ron Sugar who will share his experiences and perspectives based on his extraordinary career as both a CEO and a Director of some of the largest, most complex companies in America. The discussion will focus on how to best align the objectives and roles of Outside Directors with those of Management Teams.

Please join us for this exciting luncheon where you will hear from two powerhouse corporate governance women - Anne Sheehan (CalSTRS) and Michelle Edkins (BlackRock) and a third powerhouse moderator, Chris Mitchell (Marshall & Stevens). You won't want to miss this event!

Join us for an exciting lunch program that will drill down into the impact of Generational Dynamics on leadership.
* Why did America's executive ethics derail so badly during the leadership era of the Silent Generation in the 1990s and 2000s?
* Why is there such promise and hope as the Boomers, to the astonishment of most, are only just beginning their turn at the top?
* What unique core values do GenX and Millennials bring to leadership and governance as they advance?

The National Association of Corporate Directors (NACD), Southern California Chapter, and the National Investor Relations Institute - Los Angeles, is proud to present the Executive Chairman of the nation's sixth largest local exchange carrier, that in seven years has increased its revenues 2.5 times. Moderating this conversation will be Larraine Segil, a seasoned director, CEO, entrepreneur, and author.

The Southern California Chapter of the NACD together with the Audit Committee Roundtable of Orange County, invite directors to attend an interactive session focused on preparing for disruptive technologies.